Are Recent College Graduates Finding Good Jobs?

Volume 20, Number 1 ❖ 2014 ❖ www.newyorkfed.org/research/current_issues
in Economics and Finance
current issues
FEDERAL RESERVE BANK OF NEW YORK
Are Recent College Graduates
Finding Good Jobs?
Jaison R. Abel, Richard Deitz, and Yaqin Su
According to numerous accounts, the Great Recession has
left many recent college graduates struggling to find jobs
that utilize their education. However, a look at the data
on the employment outcomes for recent graduates over the
past two decades suggests that such difficulties are not a
new phenomenon: individuals just beginning their careers
often need time to transition into the labor market. Still, the
percentage who are unemployed or “underemployed”—working
in a job that typically does not require a bachelor’s degree—has
risen, particularly since the 2001 recession. Moreover, the
quality of the jobs held by the underemployed has declined,
with today’s recent graduates increasingly accepting low-wage
jobs or working part-time.
A
c ollege education is an important investment that helps people build their
skills and prepare for high-skilled jobs. Historically, those who have made
this investment have received a substantial economic benefit that lasts over
their lifetime. However, with the onset of the Great Recession and the sluggish
labor market recovery that has ensued, there have been widespread reports of
newly minted college graduates who are unsuccessful at finding jobs suited to their
level of education. According to many accounts, recent graduates are finding it
increasingly difficult to secure a job, and those who do find work are often
confined to low-wage positions. Stories of this nature raise troubling questions
about whether a college degree still helps people find good jobs.
In this edition of Current Issues, we assess just how difficult the labor market
has become for recent college graduates. In doing so, we move beyond anecdotal
evidence to examine more than two decades of data on the employment outcomes
of recent college graduates. This approach allows us to put the experience of those
entering the labor market during the latest business cycle into historical perspective.
Our analysis reveals that, by historical standards, unemployment rates for
recent college graduates have indeed been quite high since the onset of the Great
Recession. Moreover, underemployment among recent graduates—a condition
defined here as working in jobs that typically do not require a bachelor’s degree—is
also on the rise, part of a trend that began with the 2001 recession. To be sure, our
comparison of the experience of new graduates today with that of new graduates in
earlier periods shows that fairly high unemployment and underemployment are not
uncommon for young people just after they obtain their degrees; this pattern arises
because college graduates generally require some time to transition into the labor
market. However, when we delve further to examine the quality of jobs held by the
CURRENT ISSUES IN ECONOMICS AND FINANCE ❖ Volume 20, Number 1
underemployed, we find that recent graduates are increasingly
working in low-wage jobs or working part-time. We conclude
that while elevated rates of unemployment and underemployment may be typical for recent college graduates, finding a good
job has indeed become more difficult.
In the final section of our analysis, we examine whether
recent graduates in some majors are achieving better labor
market outcomes than others. Our results show that unemployment and underemployment rates differ markedly across
majors: students majoring in fields that provide technical
training, such as engineering or math and computers, or
majoring in fields geared toward growing parts of the economy,
such as education and health, have tended to do relatively well,
even in today’s challenging labor market.
The Labor Market for Recent College Graduates
For the purposes of our analysis, recent college graduates
are defined as those with at least a bachelor’s degree who are
twenty-two to twenty-seven years old. We select this group
in order to capture college graduates within their first five
years after graduation.1 We exclude those currently enrolled
in school from our analysis, whether full-time or part-time, to
avoid any confusion about whether people are unemployed or
underemployed because they are attending school.
Unemployment among Recent College Graduates
To get some perspective on the labor market difficulties of
recent college graduates, we track the unemployment rate for
this group relative to three other groups: all workers (that is,
those who are sixteen to sixty-five), all college graduates, and
a comparable group of young workers, aged twenty-two to
twenty-seven, without college degrees (Chart 1). Our sample
period, extending from 1990 through the first part of 2013,
encompasses the 1990-91 and 2001 recessions as well as
the Great Recession of 2007-09. As Chart 1 makes clear, the
unemployment rates for all four groups followed common
trends during this period: the rates tended to move with the
business cycle, rising during the recessions and dropping
steadily during the subsequent recoveries. In addition, the
unemployment rate for all groups rose to particularly high
levels during and after the 2007-09 recession, and then began
to decline in 2010 as the labor market started to improve.
More telling, however, are the differences among the groups.
College graduates as a whole fared the best throughout the
sample period, experiencing unemployment rates that were
about half the rate all workers experienced. But for recent
college graduates—the group of immediate interest for our
study—unemployment was consistently higher than for college
1 Some graduates receive their degrees at ages beyond their early twenties.
Because of data limitations, however, we are not able to identify these older
recent college graduates, so they are not included in our analysis.
2
Chart 1
Unemployment Rates for Recent College Graduates
and Other Groups
Percent
16
Young workers
All workers
Recent college graduates
College graduates
14
12
10
8
6
4
2
0
1990
92
94
96
98
00
02
04
06
08
10
12
Sources: U.S. Census Bureau and U.S. Bureau of Labor Statistics, Current
Population Survey.
Notes: Rates are calculated as a twelve-month moving average. All workers are those
aged 16 to 65; college graduates are those aged 22 to 65 with a bachelor’s degree
or higher; recent college graduates are those aged 22 to 27 with a bachelor’s degree
or higher; young workers are those aged 22 to 27 without a bachelor’s degree or
higher. All figures exclude those currently enrolled in school. Shaded areas indicate
periods designated recessions by the National Bureau of Economic Research.
graduates as a whole. After the Great Recession, for example,
the unemployment rate for college graduates as a whole
peaked at around 5 percent in 2010, while the unemployment
rate for recent college graduates peaked at around 7 percent.
For the period 1990 through the first quarter of 2013, the
unemployment rate averaged 4.3 percent for recent college
graduates compared with 2.9 percent for all college graduates.
These results suggest that finding a job tends to be more
difficult for those just out of school than for those who have
been out of school longer; moreover, this disparity exists at all
points in the business cycle.
To get a clearer picture about the transition to employment
that occurs upon graduation, we examine the unemployment
rate for college graduates of different ages. Using data from
the U.S. Census Bureau covering the decennial census
years 1990 and 2000, as well as a parallel three-year pooled
dataset for 2009-11, we plot an age-unemployment rate
profile for college graduates at each point in time up to age
thirty-five (Chart 2). In all cases, an inverse relationship
exists, indicating that the unemployment rate tends to decline
as college graduates transition from school into the labor
market. During 2009-11—a period that encompasses the end
of the Great Recession and the beginning of the recovery—
the unemployment rate was about 10 percent for those
aged twenty-two, dropping to about 8 percent for twentythree-year-olds. By the time college graduates reached their
late twenties, the unemployment rate had fallen to around
4 percent, and held fairly steady at this rate thereafter. This
Chart 2
Chart 3
College Graduates’ Unemployment Rate, by Age
Underemployment Rates for College Graduates
Percent
12
Percent
60
10
50
8
40
6
Recent college graduates
College graduates
30
2009-11
4
1990
2
2000
0
22
23
24
25
26
27
28 28 30 29 32 31 34 35
Age
Sources: U.S. Census Bureau, Decennial Census and American Community Survey.
Notes: College graduates are those with a bachelor’s degree or higher. All figures
exclude those currently enrolled in school.
same inverse relationship between age and the unemployment
rate is also apparent in 1990 and 2000, though unemployment
rates were decidedly lower for all ages in these time periods
than in 2009-11.
The inverse relationship between age and the unemployment rate appears to hold across time, and occurs even during
peaks in the business cycle, as was the case in 1990 and 2000.
This pattern suggests that it is typical for young college graduates to have relatively high unemployment rates, and that these
rates can be expected to decline as the graduates continue on
in the labor force. It takes time for recent college graduates to
settle into the labor market and find a job, and this has historically tended to be the case.
Note, however, that the relatively high unemployment
experienced by recent college graduates should not prompt us
to dismiss the value of a college education in helping young
workers find jobs. As Chart 1 showed, the unemployment rate
for young workers without a college degree was significantly
higher than the rate for recent college graduates. The unemployment rate climbed to nearly 16 percent in 2010 for young
workers without degrees, more than double the peak unemployment rate of 7 percent for new college graduates.
Underemployment among Recent College Graduates
While high unemployment among recent college graduates
has attracted considerable attention from policymakers and
the public alike, there is also growing concern that recent
graduates are finding themselves underemployed—that is,
working in jobs that do not require a college degree.2 This
2 See, for example, Fogg and Harrington (2011) and Vedder, Denhart, and
Robe (2013).
20
10
0
1990
92
94
96
98
00
02
04
06
08
10
12
Sources: U.S. Census Bureau and U.S. Bureau of Labor Statistics, Current
Population Survey, March Supplement; U.S. Department of Labor, O*NET.
Notes: College graduates are those aged 22 to 65 with a bachelor’s degree or higher;
recent college graduates are those aged 22 to 27 with a bachelor’s degree or higher.
All figures exclude those currently enrolled in school. Shaded areas indicate periods
designated recessions by the National Bureau of Economic Research.
phenomenon is exemplified by news stories of recent college
graduates who, unable to find employment that fits their
education level, take jobs as baristas, bartenders, or retail
clerks. But just how widespread is underemployment for
recent college graduates?
To measure underemployment, we utilize data from the
U.S. Department of Labor’s Occupational Information Network
(O*NET). O*NET contains information on job-related
requirements for hundreds of occupations, collected from
interviews of incumbent workers and with input from professional occupational analysts. We use the following question
from the O*NET Education and Training Questionnaire to
determine whether an occupation requires a college degree:
“If someone were being hired to perform this job, indicate
the level of education that would be required.” We consider a
college education to be a requirement for a given occupation if
at least 50 percent of the respondents working in that occupation indicated that a bachelor’s degree is necessary to perform
the job. We then merged these data on the educational requirements for each occupation with data from the decennial Census,
American Community Survey, and Current Population Survey
on individual workers and their occupations. A college graduate is considered underemployed if he or she is working in an
occupation that does not typically require a bachelor’s degree.
We calculate the underemployment rate as the number
of graduates underemployed divided by total graduates
employed. In Chart 3, we report the underemployment rate
from 1990 to 2012 for two different groups: all college graduates and recent college graduates. For college graduates as a
whole, the underemployment rate has held steady at around
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CURRENT ISSUES IN ECONOMICS AND FINANCE ❖ Volume 20, Number 1
33 percent over the past two decades—meaning that about one
in three college-educated workers typically holds a job that
does not require a degree. The fact that the rate has remained
fairly uniform at different points in the business cycle suggests
that it is not unusual for a significant share of college graduates
to work in jobs that do not require a degree.
For recent college graduates, the picture looks quite
different. First, in all years, the underemployment rate is
higher for recent college graduates than for college graduates
as a whole, indicating that underemployment is consistently
more widespread for this group. Second, the underemployment rate for new college graduates has not held steady. The
rate rose to 46 percent during the 1990-91 recession, then fell
significantly during the economic expansion of the 1990s.
By 2001, the rate had dropped to 34 percent. During the first
decade of the 2000s, the underemployment rate rose somewhat
sharply after both the 2001 and 2007-09 recessions, and in
each case, only partially retreated, resulting in an increase to
roughly 44 percent by 2012. Thus, it appears that the underemployment rate has, in fact, been rising for recent college
graduates since 2001. Nevertheless, the high rate over the past
few years is not unprecedented; rather, it represents a return to
the level that prevailed in the early 1990s.3
To what extent does this high rate of underemployment
among recent graduates simply reflect a natural transition
into the labor market? As we did for unemployment, we
construct age-underemployment rate profiles for college
graduates for 1990, 2000, and 2009-11 to address this question
(Chart 4). And as was the case for the unemployment rate,
we find an inverse relationship between age and the underemployment rate for all time periods. Focusing first on the
2009-11 period, we see that the underemployment rate for
twenty-two-year-olds is about 56 percent, indicating that more
than half of the people just graduating end up working in jobs
that do not require a degree. This rate drops to 40 percent
by age twenty-seven, and reaches the average historical level
of about thirty-three percent by the time people reach their
thirties. This pattern suggests that recent graduates do, in
fact, tend to have relatively high levels of underemployment
upon graduation, but that underemployment declines as
these graduates spend time in the labor market. However, the
age-underemployment profile we estimate for 2009-2011 is
somewhat higher than the profile for 1990, and significantly
higher than the profile seen in 2000.
Overall, the trends described in this section imply that
high underemployment among recent college graduates
is not unusual. Recent graduates tend to take some time
after they graduate to find jobs that fit their education. But
3 It is probably no coincidence that the early 1990s also saw much discussion about
the underemployment of recent graduates and the value of a college degree. See, for
example, Hecker (1992) and Tyler, Murnane, and Levy (1995).
4
Chart 4
College Graduates’ Underemployment Rate, by Age
Percent
60
2009-11
50
40
1990
2000
30
20
10
0
22
23
24
25
26
27
28 29 30 31 32 33 34 35
Age
Sources: U.S. Census Bureau, Decennial Census and American Community Survey,
U.S. Department of Labor, O*NET.
Notes: College graduates are those with a bachelor’s degree or higher. All figures
exclude those currently enrolled in school.
the fact that the underemployment rate in recent years has
been higher than in the early 2000s does suggest that it has
become more difficult over the past decade for recent college
graduates to find jobs that utilize their degrees. While there
appears to be a cyclical component to underemployment
among recent college graduates, the broader V-shaped
pattern in the underemployment rate over the past two
decades is also consistent with new research arguing that
there has been a reversal in the demand for cognitive skills
since 2000.4 According to this research, businesses ramped
up their hiring of college-educated workers in an effort to
adapt to the technological changes occurring during the
1980s and 1990s. However, as the information technology
revolution reached maturity, demand for cognitive skill
fell accordingly. As a result, during the first decade of the
2000s, many college graduates were forced to move down the
occupational hierarchy to take jobs typically performed by
lower-skilled workers. From this perspective, the relatively low
underemployment rates among recent college graduates at the
peak of the technology boom around 2000 may in fact be an
outlier, while the recent rise in underemployment represents a
return to more typical conditions.
Job Quality among the Underemployed
While the underemployment rate appears to have reverted
to levels that existed in the early 1990s, it is possible that the
quality of the jobs taken by the underemployed has changed
over time. To examine this possibility, we analyze the quality
of jobs held by those college graduates who are working in
non-college jobs (that is, underemployed college graduates).
4 See Beaudry, Green, and Sand (2013).
Chart 5
Chart 6
Share of Underemployed Graduates in Good
Non-College and Low-Wage Jobs
Share of Underemployed Graduates Working Part-Time
Percent
60
50
30
Recent college graduates
20
15
Low-wage jobs:
Recent college graduates
20
College graduates
10
5
Low-wage jobs:
College graduates
10
0
25
Good non-college jobs:
College graduates
Good non-college jobs:
Recent college graduates
40
Percent
30
1990
92
94
96
98
00
02
04
06
0
08
10
12
Sources: U.S. Census Bureau and U.S. Bureau of Labor Statistics, Current
Population Survey, March Supplement; U.S. Department of Labor, O*NET.
Notes: College graduates are those aged 22 to 65 with a bachelor’s degree or higher;
recent college graduates are those aged 22 to 27 with a bachelor‘s degree or higher.
All figures exclude those currently enrolled in school. Shaded areas indicate periods
designated recessions by the National Bureau of Economic Research.
We single out two dimensions of job quality for this group: the
type of job and the prevalence of part-time work.
Although stories of recent college graduates working as lowpaid baristas, waiters, and retail clerks abound in the media,
few commentators consider whether recent graduates might
have found good jobs that do not require a college degree—for
example, in fields such as health care and the skilled trades. To
address this possibility, we construct two groups of non-college
jobs: what we refer to as good non-college jobs and low-wage
jobs. Good non-college jobs consist of those occupations—for
example, electrician, dental hygienist, or mechanic—that paid
an average wage of around $45,000 per year in 2012. While
these jobs do not require a bachelor’s degree, they tend to be
career oriented, relatively skilled, and fairly well compensated.
At the other end of the spectrum, low-wage jobs paid an
average wage below $25,000 per year in 2012, and include
occupations such as bartender, food server, and cashier.
Analyzing the percentage of underemployed college
graduates who fall into the two job groups, we find a clear
trend: the share of underemployed college graduates in good
non-college jobs has fallen sharply, while the share working in
low-wage jobs has risen, with most of these changes occurring
since 2000 (Chart 5). The share of underemployed college
graduates in good non-college jobs was lower for recent college
graduates than for college graduates as a whole, and it fell
more steeply over time. About half of underemployed recent
college graduates were in good non-college jobs in the 1990s,
and that share fell to about 36 percent by 2009. As for low-wage
jobs, the share of workers in this group was similar for recent
1990
92
94
96
98
00
02
04
06
08
10
12
Sources: U.S. Census Bureau and U.S. Bureau of Labor Statistics, Current
Population Survey, March Supplement; U.S. Department of Labor, O*NET.
Notes: College graduates are those aged 22 to 65 with a bachelor’s degree or higher;
recent college graduates are those aged 22 to 27 with a bachelor’s degree or higher.
All figures exclude those currently enrolled in school. Shaded areas indicate periods
designated recessions by the National Bureau of Economic Research. Shaded areas
indicate periods designated recessions by the National Bureau of Economic Research.
college graduates and all college graduates in the 1990s, but
beginning in 2000, the shares for the two series diverged. The
share of recent college graduates in low-wage jobs rose from
about 15 percent in 1990 to more than 20 percent by 2009, while
the corresponding share of all college graduates increased only
modestly, from 13 percent to 15 percent. Together, these trends
suggest that the quality of jobs for underemployed recent college
graduates has been on the decline, particularly since 2000.
The second dimension of job quality that we consider is the
extent to which underemployed college graduates are working
part-time. Using the U.S. Bureau of Labor Statistics’ definition
of part-time workers as those who usually work fewer than
35 hours per week, we track the extent to which underemployed
college graduates—all graduates as well as recent graduates—
have worked part-time between 1990 and 2012 (Chart 6). The
two series are somewhat volatile, but beginning with the 2001
recession, an upward trend in part-time work is evident in
both. Significantly, however, the increase is much steeper for
recent graduates than for college graduates as a whole. About
14 percent of all underemployed college graduates worked
part-time during the 1990s, with this share drifting up to
around 16 percent during the 2000s. By contrast, the share of
recent college graduates working part-time rose from around
15 percent in 2000 to 23 percent by 2011, with particularly
sharp increases directly following the last two recessions.5
5 Workers without a college degree were about as likely as underemployed
college graduates to be working part-time, and experienced a similar increase
in part-time work during the 2000s. By contrast, the share of college graduates
with a job requiring a bachelor’s degree who were working part-time changed
little, remaining at around 10 percent for all college graduates and 12 percent
for recent graduates over the entire 1990-2012 period.
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CURRENT ISSUES IN ECONOMICS AND FINANCE ❖ Volume 20, Number 1
Taken as a whole, these trends provide evidence that the job
prospects for recent college graduates have indeed worsened,
even though the high rate of underemployment over the past
few years is comparable to the level seen in the early 1990s.
Among those recent college graduates who are underemployed, more are working part-time or in low-wage jobs since
2000, while fewer are working in good non-college jobs. This
downward trend in the quality of jobs for underemployed
recent college graduates compounds the increase in the level of
the group’s underemployment over the past decade.6
Labor Market Outcomes by College Major
In the wake of the Great Recession, recent college graduates are
clearly facing significant labor market challenges. But are those
recent graduates who major in certain subjects experiencing
relatively better labor market outcomes than others? To address
this question, we use newly available census data identifying
college graduates’ undergraduate majors to analyze differences
in employment outcomes across majors. Beginning in 2009, the
American Community Survey asked those with a college degree
to identify their undergraduate major. We classify recent college
graduates as belonging to one of thirteen different undergraduate majors, and utilize this information to look at unemployment and underemployment by major for the 2009-11 period.
Care must be taken when interpreting our findings on
the labor market outcomes of recent college graduates across
majors. Because students sort into their chosen field of
study based in part on their ability to complete the required
coursework, not all majors are feasible for every college
student.7 Moreover, graduates with different majors likely differ
in other important ways, such as intelligence, perseverance, or
motivation. Indeed, recent research has shown that graduating
with a math or science major is more difficult than pursuing
other fields of study.8 In addition, the results we present below
represent average outcomes for people within each of the thirteen majors we analyze. Thus, by definition, some individuals
within each major will have better or worse experiences than
our results would indicate. Nonetheless, examining the typical
experience provides useful insight into the variation in labor
market outcomes that exists for recent college graduates with
different majors.
6 During bad economic times, young people who wish to avoid being
unemployed or underemployed may choose to delay their entrance to the
job market, either by taking more time to complete a degree or by entering
graduate school. Given the incentives to remain in school, the labor market
difficulties for recent college graduates during the 2000s may in fact be more
pronounced than our findings suggest.
7 See, for example, Arcidiacono (2004) and Zafar (2011) for research on the
determinants of and returns to college majors.
8 See Stinebrickner and Stinebrickner (2013).
6
Chart 7
Employment Outcomes for Recent College Graduates
by Major, 2009-11
Percentage unemployed
Percentage in jobs where a bachelor's degree is required
Percentage in jobs where a bachelor's degree is not required
Engineering 5
75
20
Education 4
75
22
Health 3
75
22
65
29
60
32
Sciences 6
51
43
Social sciences 7
45
48
Business 6
44
50
Liberal arts 8
40
52
Communications 6
40
54
Technologies 6
38
55
38
57
33
63
Math and
computers 6
Architecture and
construction 8
Agriculture and
natural resources 5
Leisure and
hospitality 4
Sources: U.S. Census Bureau, American Community Survey; U.S. Department of
Labor, O*NET.
Notes: Recent college graduates are those aged 22 to 27 with a bachelor’s degree or
higher. All figures exclude those currently enrolled in school. Because of rounding,
figures in each bar may not sum to 100.
We characterize the labor market situation for recent college
graduates by looking at three possible labor market outcomes
for each graduate: unemployed, employed in a job where a
bachelor’s degree is required, and employed in a job where a
bachelor’s degree is not required. We then identify the share
of recent college graduates in each of the thirteen majors that
has experienced each of these outcomes (Chart 7). We find
that unemployment rates across majors range from 3 percent
to 8 percent. The two majors with the lowest unemployment
rates are health majors, at 3 percent, and education majors, at
just under 4 percent. Relatively low unemployment rates for
these majors likely reflect the stability of the education and
health sectors, which grew before, during, and after the Great
Recession and thus have tended to provide a growing number
of jobs during this period. At the other end of the spectrum, the
unemployment rate for architecture and construction majors
was 8 percent—a finding consistent with the lack of jobs in
housing-related sectors of the economy following the housing
bust. Liberal arts and social sciences majors also tended to have
relatively high unemployment rates, at 7 to 8 percent.
Perce
Perce
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Chart 7 also identifies the share of recent college graduates working in jobs where a bachelor’s degree is required
and the share working in jobs where a bachelor’s degree is not
required. For example, 75 percent of those with an engineering
degree worked in a job that required a college degree.9 We find
that majors providing technical training—that is, training that
focuses on quantitative and analytical skills—had the highest
shares of graduates working in jobs that require a degree; engineering and math and computers majors are cases in point. In
addition, education and health majors also had high shares of
workers employed in jobs that require a college degree, again
likely reflecting the growth of these sectors in recent years.
At the other end of the spectrum, leisure and hospitality
was the major with the lowest share of graduates working in
a job that required a degree. Although degree holders with
this major experienced relatively low unemployment, only
33 percent were working in jobs that required a bachelor’s
degree, while 63 percent worked in jobs that did not require
this degree. It is likely that many of the jobs such graduates
took were in the leisure and hospitality industry, and these
jobs often do not require a bachelor’s degree. Similarly, only
38 percent of recent graduates with a technologies major—
which provides practical training in fields such as electrical
and mechanical repairs, radiology, and biological technologies—were working in a job that required a bachelor’s degree.
This finding may stem in part from the fact that many of the
jobs for people with this type of training often require only an
associate’s degree. In addition, many of the majors that provide
general training—that is, training that is not occupationspecific or highly technical in nature—also ranked relatively
low on this dimension. In particular, only 40 to 45 percent of
recent college graduates majoring in communications, liberal
arts, business, and social sciences were working in jobs that
required a degree.
Conclusion
While stories about recent college graduates’ struggles to find a
good job have become increasingly common over the past few
years, we show that this experience is not a new phenomenon,
nor one that can be ascribed simply to the Great Recession
and the ensuing weakness in the labor market. Our analysis
demonstrates that new college graduates typically take some
time to transition into the labor market and find jobs that
utilize their education. In fact, during both good and bad
economic times, relatively high rates of unemployment and
underemployment are not uncommon among college graduates
just beginning their careers, and those rates can be expected
to drop considerably by the time the graduates reach their late
9 These jobs are not necessarily engineering jobs, but are any jobs that require
a bachelor’s degree. For example, if someone with an engineering major
were working as an electrical engineer or a financial manager, each would be
counted as working in a job that requires a bachelor’s degree.
twenties. Moreover, while it appears that the labor market has
become more challenging for recent college graduates, it is
much worse for young people who do not have a college degree.
That said, both unemployment and underemployment have
followed a clear upward trend for recent college graduates over
the past two decades, and particularly since the 2001 recession.
In addition, it has become more common for underemployed
college graduates to find themselves in low-wage jobs or to
be working part-time. It is not clear whether these trends
represent a structural change in the labor market, or if they
are a consequence of the two recessions and jobless recoveries
in the first decade of the 2000s. Either way, young college
graduates entering the labor market since the 2001 recession
face more challenges in finding a good job. While many of these
graduates will eventually find employment or transition into
higher-skilled jobs as they gain experience and as the labor
market normalizes, recent research suggests that those who
begin their careers during such a weak labor market recovery
may see permanent negative effects on their wages.10
What can students do to increase their chances of finding
a good job upon graduation? It does appear that one’s college
major matters: unemployment and underemployment rates
differ markedly across majors. In particular, those who choose
majors that provide technical training, such as engineering or
math and computers, or majors that are geared toward growing
parts of the economy, such as education and health, have
tended to do relatively well. At the other end of the spectrum,
those with majors that provide less technical and more general
training, such as leisure and hospitality, communications, the
liberal arts, and even the social sciences and business, have not
tended to fare particularly well in recent years. An important
caveat about this interpretation is that the links we show
between college major, unemployment, and underemployment
are not necessarily causal. That is, the data may in part reflect
the fact that people can sort into majors based on their skill
level, such that those with higher innate skills and abilities
select majors that tend to have better labor market outcomes.
Nonetheless, with this caveat in mind, it appears that college
major plays a role in determining whether a college graduate
will find a good job.
There may be other ways to foster better outcomes for
college graduates as well. Timely information on the fields
in which jobs are available, what different jobs pay, and the
career paths new workers can expect over their lifetime would
be helpful to the parents and students investing in a college
education. One means of generating such information would
be for higher education institutions to establish or expand
their partnerships with businesses. In this way, colleges and
universities could develop a fuller understanding of the
relationship between their own curriculum, the needs of
10 See Kahn (2010).
www.newyorkfed.org/research/current_issues
7
employers, and the majors selected by their students. Further,
close ties between employers and higher education institutions
would help ensure that the information given to students on
jobs and careers was current. Providing such information early
and often could help students make more educated decisions
about their major, and ultimately, about the most valuable
skills to build while in school. While securing that first job out
of college may continue to be a challenge for many, having a
better grasp of the landscape of the labor market could help
more college graduates find good jobs upon graduation.
References
Arcidiacono, Peter. 2004. “Ability Sorting and the Returns to College Major.”
Journal of Econometrics 121, no. 1-2: 343-75.
Beaudry, Paul, David A. Green, and Benjamin M. Sand. 2013. “The Great
Reversal in the Demand for Skill and Cognitive Tasks.” NBER Working Paper
no. 18901, March.
Graduates and the College Labor Market.” Continuing Higher Education
Review 75: 51-65.
Hecker, Daniel E. 1992. “Reconciling Conflicting Data on Jobs for College
Graduates.” Monthly Labor Review, July: 3-12.
Kahn, Lisa B. 2010. “The Long-Term Labor Market Consequences of
Graduating from College in a Bad Economy.” Labour Economics 17,
no. 2 (April): 303-16.
Stinebrickner, Ralph, and Todd R. Stinebrickner. 2013. “A Major in Science?
Initial Beliefs and Final Outcomes for College Major and Dropout.” NBER
Working Paper no. 19165, June.
Tyler, John, Richard J. Murnane, and Frank Levy. 1995. “Are More College
Graduates Really Taking ‘High School’ Jobs?” Monthly Labor Review,
December: 18-27.
Vedder, Richard, Christopher Denhart, and Jonathan Robe. 2013. “Why Are
Recent College Graduates Underemployed?” Center for College Affordability
and Productivity Policy Paper, January.
Zafar, Basit. 2011. “How Do College Students Form Expectations?” Journal
of Labor Economics 29, no. 2 (April): 301-48.
Fogg, Neeta P., and Paul E. Harrington. 2011. “Rising Mal-Employment and
the Great Recession: The Growing Disconnection between Recent College
About the Authors
Jaison R. Abel is a senior economist and Richard Deitz an assistant vice president in the Regional Analysis Function of the Federal
Reserve Bank of New York’s Research and Statistics Group. Yaqin Su was a Ph.D. intern in the Regional Analysis Function at the
time this article was written.
The content co-editor of this article is Basit Zafar.
Current Issues in Economics and Finance is published by the Research and Statistics Group of the Federal Reserve Bank of New York.
Michael Fleming and Thomas Klitgaard are the editors of the series.
Editorial Staff: Valerie LaPorte, Mike De Mott, Michelle Bailer, Karen Carter, Anna Snider
Production: Jane Urry, Jessica Iannuzzi, David Rosenberg
The views expressed in this article are those of the authors and do not necessarily reflect the position
of the Federal Reserve Bank of New York or the Federal Reserve System.
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